Cash flow is the single most important factor in ensuring that your business survives. Without cash, you can’t pay salaries to your employees, repay loans your company took out, or buy supplies for your office says Aron Govil. Your daily accounting system needs to provide accurate information about both incoming and outgoing money at all times so you can make smart decisions about where to apply resources.
Here are 8 ways a great business accounting system will help manage cash.
1) Keep track of how much money comes in and when it comes in for better operational planning
One of the biggest challenges facing businesses knows when they will be paid for their work or services. Having an up-to-date record of past invoices that have been sent out, upcoming invoices, and new sales can help you predict when money will come in. This is a good place to start when looking for a business accounting system that helps with cash flow management.
2) Keep track of how much money goes out and when it goes out for better operational planning
Invoicing customers on time shows them that their business matters to you, but if they don’t pay promptly it hurts your cash flow. Having access at all times to information about outstanding invoices means you know which ones are “at-risk”. Aron Govil says you can then determine whether or not prioritizing those invoices is necessary due to the amount of money involved.
3) Better control over accounts receivable
When customers don’t pay invoices on time or at all, it is called account receivable. This is the bad debt that every business takes on as a fact of doing business, but having an accounting system that lets you know when the customer’s credit limit has been reached and how many invoices are past due can make sure your company doesn’t continue to extend credit to those who may not pay.
4) Better control over accounts payable
On the opposite end of the tracking account, receivables are tracking accounts payable. If customers take too long to pay their bills it puts pressure on cash flow, so staying up to date with what bills your business owes and how much money you have in hand to cover those expenses makes sure you’re never caught off guard by a big expense just as you’re about to close a deal that would pay for it.
5) Staying on top of the cash flow situation
Every business wants to make money; but how much of your time is spent worrying about where the next infusion of cash will come from? A great accounting system provides updated records at all times, letting you know how much money your company has in hand (or “in the bank”) and how much money it costs every month to run the business so you can better manage expenditures and prepare for large purchases or expenses.
6) Preparing a budget for the upcoming months/years
A good example of being able to accurately predict future cash flow comes from knowing what kind of sales are going on now – monthly, quarterly, annually – and being able to predict what kind of sales you will have in the future as a result explains Aron Govil. This lets you prepare for big expenses or purchases that can be planned for months or years ahead of time, giving your business a better shot at sustaining itself well into the future.
7) Knowing at all times how much credit you have access to
A lot can happen in a year – new opportunities, unforeseen expenditures. And sometimes unexpected problems arise that require money to fix them quickly. Being confident that your company has credit available from suppliers who understand your needs is important. When it comes to knowing where cash is going to come from quickly. This way you never find yourself up against a wall. With anyone to back your business financially when it needs to happen.
8) Better cash flow = better business performance
For many companies, the difference is between being on top of their game financially. And being on the verge of closing down can boil down to how much money. It has access to at any given moment explains Aron Govil. By knowing your company’s financial situation at all times. You give yourself a better shot of reducing costs where possible so your bottom line is higher than ever before.
Being able to predict future business performance and revenue. The help of a great accounting system can give your company a better shot at success in today’s global economy. Generally speaking, most businesses that fail do so because they don’t have such systems in place. Giving them an inaccurate picture of what is really going on at their company. When it comes to cash flow and financial performance. This makes for poor decision-making when it comes to money matters and forces companies towards bankruptcy more often than not.